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If the auditor determines that internal controls are not functioning as designed, and a compensating control...

If the auditor determines that internal controls are not functioning as designed, and a compensating control does not exist, the auditor will assess control risk and the risk of material misstatement (RMM) as_______.

Select one:

a. low and set detection risk as low

b. low and set detection risk as high

c. high and set detection risk as low

d. high and set detection risk as high

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Answer #1

b. low and set detection risk as high

Explanation :

When the internal controls are not in place or are not operating to serve their purpose and compensation controls does not exist, there is a high chance of material misstatement in the system. This means that the auditor will have to take a large sample for performing audit procedures because the as the risk of material misstatement increases, there will be an increment of the detection risk also.

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